Explain by giving an example, how is demand for a good affected w… - Vidyadip

Question

Explain by giving an example, how is demand for a good affected when price of its substitute rises.

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Answer

In case of substitute goods, increase in the price of one good results in increase in the demand of its substitute goods, e.g. tea and coffee are substitute goods.
When the price of tea increases then consumers start consuming coffee in place of tea. As a result, demand of coffee increases.

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